Study Shows Keys to Future Success—If You Know Where to Look

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Wealth management in 2018 is a tough business.

There has never been more competition, product options are more plentiful, and information (both to you and your clients) is more available than ever before. Successful wealth managers must combine technical financial market skills with people management skills, all while new regulations and technological advancements move the goalposts. With these dynamics pulling at every advisory firm, the question becomes, “What can I do to set myself apart?”

A recent study we at Exponential ETFs commissioned to the American Customer Satisfaction Index (ACSI) might have a few answers. The ACSI is a national economic indicator based on customer evaluations of the quality of products and services available to household consumers in the U.S. The ACSI measures companies across the spectrum of the U.S. economy and recently released the findings of their 2017 Financial Advisors Report. The topline conclusions of the study are noteworthy and fairly intuitive:

  • The industry is highly rated relative to other industries, coming in at 81 on a scale from 0 to 100. Financial advice is the ninth-highest rated industry by the ACSI.
  • The industry is competitive. The “spread” between the highest and lowest rated firms were very tight (4 points).
  • There does not seem to be a tremendous advantage to firm structure (i.e. wirehouse versus independent versus RIA) when it comes to satisfying customers.

You are probably thinking at this point, “The study concludes we work in a competitive industry that has little differentiation. That is not at all helpful.” And if you looked only at the top-line results, you would be right. But peel the onion a little deeper and some useful insights appear. In this case, one must look at the underlying responses from the survey.

Before that, it is important to note that we in financial services do not, in fact, live in a vacuum. While we go about our day-to-day, the world outside our door does roll onward. This is noteworthy for three reasons:

  1. The world and how people interact with it has changed forever due to technological advancements.
  2. Your clients will continue to cycle through their life path.
  3. According to MetLife estimates, $30 trillion to $41 trillion will change hands between the baby boomers and Generation X/millennials between 2011 and 2048.

In short, your clients of tomorrow will look and behave very differently than your clients today. Technology has advanced and complicated the means through which we communicate, and managing this in the future will be key to success. The greatest risk (and opportunity) for any wealth manager is the transition from one generation to the next.

This brings us back to the underlying responses to the ACSI study. Out of the 12 categories measured, the three areas that received the lowest scores from customers were advisers’ clear explanation of prices and fees, the frequency of personal contact and mobile options. These three areas of relative weakness provide the greatest opportunity for an adviser to set him or herself apart because of the personalized nature of each. But these areas of weakness also provide a warning sign of things to come as the multi-generational wealth transfer continues. Here are some thoughts on each:

  • Clearly explaining prices and fees. Financial professionals provide a great service to their clients, but they must more clearly articulate their fee while also tying it into a broader discussion regarding value. In the final analysis, a good financial adviser brings discipline and structure to their clients’ financial plans. This should not be an exercise in “justifying” your fee, but rather explaining it.
  • Frequency of personal contact. The ideal amount of personal contact will vary from person to person and is typically more a statement on when you connect than how frequently you connect. Every adviser should have a list of clients they need to call during certain triggers, like during market volatility, before tax season, etc.
  • Providing mobile options for account management. The highly regulated nature of wealth management makes this a challenge, however it speaks to the overall need to embrace technology and, more importantly, work with your clients on their terms. Again, this will be of utmost importance as the next generation of tech-savvy clients comes of age.

The ACSI study provides confirmation that the wealth management industry has struck the right chord overall with its clients. The wealth management experience is strong. However, underlying these conclusions lies both a warning that the next generation of clients will require an evolved service model, as well as an opportunity for advisers who are up for the challenge.

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Kevin Quigg is the chief strategist at Exponential ETFs, where he is responsible for business strategy, investor relations and client development for Exponential investment products.

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